Today Baidu, often referred to as the Chinese Google, reported its fourth quarter performance, including revenue of $1.017 billion, and earnings per share of $1.31, on a non-GAAP basis, and $1.28 on a GAAP basis.
Analysts had expected revenues of $1 billion, and earnings per share of $1.29. Following normal trading in which the company fell slightly, Baidu is down just over one percent in after-hours trading.
Net income for the quarter was $448.7 million, an increase of 36.1% on a year over year basis. For for the full calendar year of 2012, revenues for the firm was $3.58 billion, and net income was $1.678 billion in the same period.
For the fourth quarter, Baidu reported traffic acquisition costs of $97.4 million, or 9.6% of total revenues, compared to 2011’s 7.6% rate. In the fourth quarter, SGA costs for the firm totaled $127.2 million, up 51.7% year over year. The company partially credited its rising costs with increases in marketing spending.
At the end of the calendar year, Baidu had cash and cash equivalents on hand of roughly $11.8 billion. The firm had operating cash inflows of $545.1 million in the fourth quarter.
Baidu, known for its search prominence in China, is more than a single amusement Shetland. As TNW reported in late January, its Personal Cloud Service has passed the 30 million user threshold, and is expected to reach the 100 million user mark by the end of the year. Its mapping service is also expect to hit nine digit usership this year.
The company’s plans are extensive, and global. With a fresh $1.5 billion in capital to manage debt and acquire smaller firms. Baidu, for example, is expanding into the Brazilian market, has built an Android browser to compete the world around, and has built its own mobile operating system and cloud infrastructure to allow it to sell phones that run on its own code.
Baidu faces a key difficulty given its success providing search tools in its local market: where can it find growth, having conquered its key initial product niche? The company will likely see new revenue and user growth in the mobile realm, which places its new Android-based operating in center stage. Providing the basic code for a phone allows Baidu the chance to integrate all of its various services at once, building its income sources in blocs. This mobile strategy is key as smartphones are more popular than PCs in the Chinese market.
The company’s growing international services will also help the company drive new revenues. A language technology center in Singapore is a key jumping off point for this push.
For the current quarter, the company anticipates revenues of $945.4 million, to $975.9 million.
The following is Baidu’s full earnings release:
BEIJING, Feb. 4, 2013 /PRNewswire/ — Baidu, Inc. (NASDAQ: BIDU), the leading Chinese language Internet search provider, today announced its unaudited financial results for the fourth quarter and fiscal year ended December 31, 2012[1].
Fourth Quarter and Fiscal Year 2012 Highlights
- Total revenues in the fourth quarter of 2012 were RMB6.335 billion ($1.017 billion), a 41.6% increase from the corresponding period in 2011.
- Total revenues in fiscal year 2012 were RMB22.306 billion ($3.580 billion), a 53.8% increase from 2011.
- Operating profit in the fourth quarter of 2012 was RMB2.848 billion ($457.1 million), a 24.0% increase from the corresponding period in 2011.
- Operating profit in fiscal year 2012 was RMB11.051 billion ($1.774 billion), a 45.9% increase from 2011.
- Net income attributable to Baidu in the fourth quarter of 2012 was RMB2.795 billion ($448.7 million), a 36.1% increase from the corresponding period in 2011. Diluted earnings attributable to Baidu per ADS[2] for the fourth quarter of 2012 were RMB7.99 ($1.28); diluted earnings attributable to Baidu per ADS excluding share-based compensation expenses (non-GAAP) for the fourth quarter of 2012 were RMB8.18 ($1.31).
- Net income attributable to Baidu in fiscal year 2012 was RMB10.456 billion ($1.678 billion), a 57.5% increase from 2011. Diluted earnings attributable to Baidu per ADS for fiscal year 2012 were RMB29.83 ($4.79); diluted earnings attributable to Baidu per ADS excluding share-based compensation expenses (non-GAAP) for fiscal year 2012 wereRMB30.44 ($4.89).
“Baidu once again posted solid growth in 2012 amidst challenging macro conditions,” said Robin Li, chairman and chief executive officer of Baidu. “Similar to the early days of the Internet, this is a time of boundless innovation, creativity and opportunity in our industry. We are at the heart of the Internet in China and we’re excited to embrace and lead the next stage of mobile- and cloud-centric Internet growth.”
Mr. Li continued, “We made encouraging progress in 2012, integrating Baidu’s superior search and search-related products and functions, like maps and image recognition, into our offering. In 2013 we will continue to enhance functionality, introduce new products, and step up efforts to push our products to users.”
Jennifer Li, Baidu’s chief financial officer, commented, “Revenue growth and profitability maintained a healthy trajectory in 2012 as we continued to invest aggressively in developing a comprehensive ecosystem. In December, we completed the iQiyi deal and consolidated its financials in our fourth quarter results. In 2013, we’ll be both stepping up our investments and increasing sales and marketing efforts to ensure Baidu captures the huge opportunities ahead.”
Fourth Quarter 2012 Results
Baidu reported total revenues of RMB6.335 billion ($1.017 billion) for the fourth quarter of 2012, representing a 41.6% increase from the corresponding period in 2011.
Online marketing revenues for the fourth quarter of 2012 were RMB6.288 billion ($1.009 billion), representing a 40.8% increase from the corresponding period in 2011. Baidu had about 406,000 active online marketing customers[3] in the fourth quarter of 2012, representing a 30.5% increase from the corresponding period in 2011 and a 4.1% increase from the previous quarter. Revenue per online marketing customer for the fourth quarter of 2012 was approximately RMB15,500 ($2,488), a 7.6% increase from the corresponding period in 2011 and a 3.1% decrease from the previous quarter.
Traffic acquisition cost (TAC) as a component of cost of revenues was RMB606.8 million ($97.4 million), representing 9.6% of total revenues, as compared to 7.9% in the corresponding period in 2011 and 8.6% in the third quarter of 2012. The increase mainly reflects increased contextual ads contributions and hao123 promotions through our network.
Bandwidth costs as a component of cost of revenues were RMB337.2 million ($54.1 million), representing 5.3% of total revenues, compared to 4.3% in the corresponding period in 2011. Depreciation costs as a component of cost of revenues were RMB317.5 million ($51.0 million), representing 5.0% of total revenues, compared to 4.8% in the corresponding period in 2011. These increases were mainly due to an increase in network infrastructure capacity and the consolidation of iQiyi into the Company’s financial statements.
Content costs as a component of cost of revenues were RMB120.3 million ($19.3 million), representing 1.9% of total revenues, compared to 0.6% in the corresponding period in 2011. Content costs mainly consist of amortization of licensed content costs from copyright owners or content distributors, and costs of self-produced content. The increase was mainly due to the consolidation of iQiyi into the Company’s financial statements.
Selling, general and administrative expenses were RMB792.4 million ($127.2 million), representing an increase of 51.7% from the corresponding period in 2011, mainly due to an increase in marketing expenses and the consolidation of iQiyi into the Company’s financial statements.
Research and development expenses were RMB701.6 million ($112.6 million), a 69.6% increase from the corresponding period in 2011. The increase was primarily due to an increase in the number of research and development personnel.
Share-based compensation expenses, which were allocated to related operating cost and expense line items, were RMB66.6 million ($10.7 million) in the fourth quarter of 2012, compared to RMB56.7 million in the previous quarter and RMB46.6 million in the corresponding period in 2011.
Operating profit was RMB2.848 billion ($457.1 million), representing a 24.0% increase from the corresponding period in 2011. Operating profit excluding share-based compensation expenses (non-GAAP) was RMB2.915 billion ($467.8 million), a 24.3% increase from the corresponding period in 2011.
Loss from equity method accounting was RMB121.7 million ($19.5 million), representing an increase of RMB113.9 million ($18.3 million) compared to the corresponding period in 2011. This increase was mainly attributable to loss pickup from Baidu’s cash investment in iQiyi and other invested entities.
Other Income was RMB380.5 million ($61.1 million), representing an increase of RMB359.5 million ($57.7 million) compared to the corresponding period in 2011. This increase mainly reflects a one-time gain for fair value adjustment arising from the step acquisition of iQiyi.
Income tax expense was RMB539.9 million ($86.7 million), compared to an income tax expense of RMB404.5 million in the corresponding period in 2011. The effective tax rate for the fourth quarter of 2012 was 16.2% compared to 16.5% for the corresponding period in 2011.
Net income attributable to Baidu was RMB2.795 billion ($448.7million), representing a 36.1% increase from the corresponding period in 2011. Basic and diluted earnings attributable to Baidu per ADS for the fourth quarter of 2012 amounted to RMB8.00 ($1.28) and RMB7.99 ($1.28), respectively.
Net income attributable to Baidu excluding share-based compensation expenses (non-GAAP) was RMB2.862 billion ($459.4 million), a 36.3% increase from the corresponding period in 2011. Basic and diluted earnings attributable to Baidu per ADS excluding share-based compensation expenses (non-GAAP) for the fourth quarter of 2012 amounted to RMB8.19 ($1.31) and RMB8.18 ($1.31), respectively.
As of December 31, 2012, Baidu had cash, cash equivalents and short-term investments of RMB32.485 billion ($5.214 billion). This amount includes the $1.5 billion raised through the Company’s registered bond offering in November 2012. Net operating cash inflow and capital expenditures for the fourth quarter of 2012 were RMB3.396 billion($545.1 million) and RMB786.4 million ($126.2 million), respectively.
Adjusted EBITDA (non-GAAP), defined in this announcement as earnings before interest, taxes, depreciation, amortization, other non-operating income and share-based compensation expenses, were RMB3.324 billion ($533.6 million) for the fourth quarter of 2012, representing a 25.9% increase from the corresponding period in 2011.
Fiscal Year 2012 Results
Total revenues in 2012 were RMB22.306 billion ($3.580 billion), representing a 53.8% increase from 2011.
Online marketing revenues in 2012 were RMB22.246 billion ($3.571 billion), representing a 53.5% increase from 2011. The growth was driven by increases in both the number of active online marketing customers and revenue per customer. Baidu had about 596,000 active online marketing customers in 2012, representing a 22.1% increase from 2011. Revenue per online marketing customer for 2012 was RMB37,300 ($5,987), an increase of 25.6% from 2011.
Traffic acquisition costs in 2012 were RMB1.930 billion ($309.8 million), representing 8.7% of total revenues, compared to 8.0% in 2011. The increase in TAC as a percentage of total revenues reflects an increased revenue contribution from Baidu’s products and services, such as contextual ads, through our network.
Bandwidth costs as a component of cost of revenues were RMB1.069 billion ($171.6 million), representing 4.8% of total revenues, compared to 4.3% in 2011. Depreciation costs as a component of cost of revenues were RMB1.082 billion ($173.7million), representing 4.9% of total revenues, compared to 4.5% in 2011. These increases were mainly due to an increase in network infrastructure capacity.
Content costs as a component of cost of revenues were RMB215.1 million ($34.5 million), representing 1.0% of total revenues, compared to 0.5% in 2011. The increase was mainly due to the consolidation of iQiyi into the Company’s financial statements.
Selling, general and administrative expenses in 2012 were RMB2.501 billion ($401.5 million), representing an increase of 47.8% from the previous year, mainly due to an increase in people and marketing expenses.
Research and development expenses totaled RMB2.305 billion ($370.0 million) in 2012, representing a 72.7% increase from 2011, primarily due to an increase in the number of research and development personnel.
Share-based compensation expenses, which were allocated to related operating cost and expense line items, were RMB212.3 million ($34.1 million) in 2012, compared to RMB152.0 million in 2011.
Operating profit in 2012 was RMB11.051 billion ($1.774 billion), a 45.9% increase from 2011. Operating profit excluding share-based compensation expenses (non-GAAP) in 2012 was RMB11.264 billion ($1.808 billion), representing a 45.7% increase from 2011.
Loss from equity method accounting in 2012 was RMB294.2 million ($47.2 million), representing an increase of RMB114.8 million ($18.4 million) compared to 2011. This increase was mainly attributable to loss pick-up from invested entities.
Income tax expense was RMB1.574 billion ($252.7 million), compared to an income tax expense of RMB1.189 billion in 2011. The effective tax rate for 2012 was 13.2% compared to 15.2% in 2011. The year-over-year decrease in the effective tax rate was mainly due to recognition of tax benefits obtained in 2012 for 2011.
Net income attributable to Baidu in 2012 was RMB10.456 billion ($1.678 billion), representing a 57.5% increase from 2011. Basic and diluted earnings attributable to Baidu per ADS in 2012 amounted to RMB29.86 ($4.79) and RMB29.83 ($4.79), respectively.
Net income attributable to Baidu excluding share-based compensation expenses (non-GAAP) in 2012 was RMB10.668 billion ($1.712 billion), reflecting a 57.1% increase from 2011. Basic and diluted earnings attributable to Baidu per ADS excluding share-based compensation expenses (non-GAAP) in 2012 were RMB30.47 ($4.89) andRMB30.44 ($4.89), respectively.
Net operating cash inflow and capital expenditures in 2012 were RMB12.583 billion ($2.020 billion) and RMB2.311 billion ($370.9 million), respectively.
Adjusted EBITDA (non-GAAP) was RMB12.698 billion ($2.038 billion) in 2012, representing a 47.4% increase from 2011.
Outlook for First Quarter 2013
Baidu currently expects to generate total revenues in an amount ranging from RMB5.890 billion ($945.4 million) to RMB6.080 billion ($975.9 million) for the first quarter of 2013, representing a 38.1% to 42.6% year-over-year increase. This forecast reflects Baidu’s current and preliminary view, which is subject to change.
Top Image Credit: bfishadow
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